Monday, October 22, 2012

Amendment 4-"Land Leases" will soon replace "Selling" commercial properties

There is a hidden “tax gift” offered by Amendment 4.  Commercial properties are bought for the income they generate.  Instead of purchasing, one could “Master Land-Lease” the entire property, with an option to buy.

That way, one would not trigger a new higher property tax assessment by purchasing, and at the same time, increase the profit on the investment.  An investor may then continue to pay taxes on the fictitious County's lower Assessed Value.

Counties would then see a double problem.  As a lease is not considered a transfer of an interest in Florida real property, there will be no documentary stamp tax due, resulting in less revenue for them. 

Furthermore, protected by the new potential 5% property tax cap (lower taxes), a purchaser can years later pay the doc stamps when and/ if the option is exercised.   That is when the taxes will be re-set to its real Market Value.  Meanwhile, they have enjoyed lower taxes for many years.  This could be made possible if Amendment 4 on the 2012 ballot is passed.

In this way, a new property owners will not be at an economic disadvantage by being saddled with higher taxes than that of a  neighbor, who might have purchased their property at an earlier time.

Barry Sharpe, of pTag: Property Tax Appeal Group, anticipates that if the Amendment passes, the wave of the future in Florida, will be to technically "purchase" a property by temporarily Master-Leasing it for a term of years and then trigger the sale at a fixed agreed upon price a few years later, based on cost of living adjustments.  That will then be a "win-win" for the investor and a loss of tax revenues for the Counties.

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